TCPA: Another Warning of the Threat of Significant Damages
On September 17, 2012, the U.S. District Court for the Western District of Washington approved a $24.15 million settlement in Arthur v. SLM Corp., No. 10-cv-198, a class action involving a certified class of up to eight million student-loan borrowers. The plaintiffs alleged that Sallie Mae, Inc. willfully and knowingly made nonemergency automated calls or sent automated text messages to their cell phones to collect debt payments, in violation of the Telephone Consumer Protection Act (TCPA). SLM Corporation is the parent company of Sallie Mae.
In Arthur, U.S. District Judge James L. Robart held that the settlement was fair, reasonable and adequate given the significant risks at issue for both sides. The court specifically noted the unsettled nature of TCPA case law at present, as well as the strength of Sallie Mae’s potential affirmative defenses.
As part of the settlement, timely claimants will not only receive a payment of over $100 each (the named plaintiffs will receive $2,500 each), but also the right to end the automated calls made to their cell phones. To that end, class members will have the opportunity to complete a short “cease and desist” letter on a website created by the parties.
Practical Impact
The Arthur decision serves as another strong warning that TCPA litigation can involve substantial damages claims. The $24 million award is one of the largest ever approved for alleged violations of the Act, and comes on the heels of similar settlement payments of $47 million and $10 million made by Jiffy Lube and Steve Madden brand products, respectively. The class plaintiffs in Arthur asserted that a maximum damages amount in the $12 billion range was conceivable given the TCPA’s penalty provisions and threat of treble damages.
The result highlights the need for increased attention to TCPA compliance by businesses using auto-dialers and automated texts. Given the unsettled nature of judicial interpretations in the area, businesses should ensure that they have a TCPA-compliance plan that complies with current regulations but allows for future flexibility. This is critical when considering the evolving definition of “prior express consent,” especially considering the FCC’s recent proposed regulation that “prior express consent” will need to be in writing for telemarketing calls.
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